N.C. Dep't of Health & Human Servs. v. Parker Home Care, LLC

246 N.C.App. 551

784 S.E.2d 552

N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Division of Medical Assistance, Petitioner,

v.PARKER HOME CARE, LLC, Respondent,andDivision of Medical Assistance, N.C. Department of Health and Human Services, Petitioner,

v.Parker Home Care, LLC, Respondent.

Nos. COA15–1026

COA15–1033.

Court of Appeals of North Carolina.

April 5, 2016.

Attorney General, Roy Cooper, by Special Deputy Attorney General, Michael T. Wood, for the State in Case No. COA 15–1026.

Attorney General, Roy Cooper, by Assistant Attorney General, Brenda Eaddy, for the State in Case No. COA 15–1033.

Parker Poe Adams & Bernstein LLP, Raleigh, by Matthew W. Wolfe and Varsha D. Gadani, for respondent-appellee.

ZACHARY, Judge.

The North Carolina Department of Health and Human Services (appellant, hereafter "DHHS"), appeals from orders denying its petitions for judicial review of orders entered by the North Carolina Office of Administrative Hearings (OAH). Upon careful review, we conclude that the trial court's orders should be affirmed.

Introduction

"Medicaid is a federal program that subsidizes the States' provision of medical services to ... ‘individuals, whose income and resources are insufficient to meet the costs of necessary medical services.’ [ 42 U.S.C.A.] § 1396–1." Armstrong v. Exceptional Child Ctr., Inc., –––U.S. ––––, ––––, 135 S.Ct. 1378, 1382, 191 L.Ed.2d 471, 476 (2015). "Medicaid offers the States a bargain: Congress provides federal funds in exchange for the States' agreement to spend them in accordance with congressionally imposed conditions." Id. Pursuant to certain federal requirements, discussed in detail below, DHHS entered into a contract with Public Consulting Group (PCG), a private company, for the purpose of having PCG conduct post-payment audits of Medicaid claims payments to health care providers. Parker Home Care, LLC (Parker) is a provider of health care services, including services for which it receives reimbursement from Medicaid funding. In both of the cases on appeal, PCG conducted an audit of a small fraction of Parker's Medicaid claims, found what it determined to be Medicaid overpayments to Parker, and mathematically extrapolated the results of its audit to reach the "tentative" determination that Parker "owed" DHHS a much larger sum. In each case, PCG sent Parker a letter (hereafter a "TNO") with the heading "TENTATIVE NOTICE OF OVERPAYMENT," setting out the results of its audit and informing Parker of its right to appeal the tentative results of PCG's audit. Several months later, DHHS suspended Parker's Medicaid reimbursement payments on unrelated claims in order to satisfy Parker's "debt" to DHHS as calculated by PCG based on the results of PCG's audit. Parker then sought a reconsideration review of DHHS's decision to suspend payments. DHHS refused to grant Parker a reconsideration review, on the grounds that Parker had failed to note an appeal from the TNO sent by PCG within the time limits applicable to contested case hearings before the OAH. Parker petitioned for a contested case hearing with the OAH, which ruled in favor of Parker. DHHS sought judicial review in Stanley County Superior Court, which also ruled for Parker.

During this litigation, DHHS has relied exclusively upon its argument that the TNO issued by PCG constituted notice of an adverse determination or final decision by DHHS and, as such, triggered the time limits for noting an appeal to the OAH. DHHS contends that, because Parker did not note an appeal from the TNO sent by PCG, neither the OAH nor the superior court had subject matter jurisdiction over Parker's appeal. As a result, the dispositive question before this Court is whether the TNO mailed by PCG to Parker was notice of a final decision by DHHS, such that the time limits for appealing from an adverse determination by DHHS started to run when Parker received the TNO. After careful review of the applicable state and federal laws, regulations, and relevant jurisprudence, we conclude that the TNO did not constitute notice of a final decision by DHHS, that the OAH and the trial court had jurisdiction, and that the trial court's orders should be affirmed.

I. Background

A. Appellate Case No. COA 15–1026

On 16 May 2012, Parker received a TNO from PCG, informing it that PCG had conducted a post-payment review of a small number of Parker's past Medicaid claims and determined that Parker had been overpaid by $3,724.08. PCG mathematically extrapolated this finding and arrived at a "tentative overpayment amount" of $391,797.00. Parker did not respond to the TNO. In January 2014, DHHS suspended payment of all Medicaid claims from Parker in order to satisfy Parker's "debt" of $391,797.00. DHHS refused to grant Parker's request for a reconsideration review of the agency's decision to withhold payments to Parker, on the grounds that Parker had failed to "appeal" from the TNO in a timely manner.

On 31 January 2014, Parker filed a petition for a contested case hearing with the OAH. On 7 February 2014, Administrative Law Judge ("ALJ") Melissa Owens Lassiter granted Parker's motion for a temporary restraining order barring DHHS from "withholding or recouping funds from [Parker's] Medicaid payments." On 19 February 2014, DHHS made an oral motion to dismiss Parker's petition for lack of subject matter jurisdiction, which was denied by ALJ Lassiter in an order entered 17 March 2014.

On 30 July 2014, a contested case hearing on this case and the companion case discussed below was conducted before ALJ J. Randolph Ward. At this hearing, DHHS presented no evidence on the substantive issue of Parker's alleged receipt of overpayments from Medicaid, but relied exclusively on its defense that the OAH lacked subject matter jurisdiction to hear the matter. On 7 October 2014, ALJ Ward issued a final decision denying DHHS's motion to dismiss and holding that "PCG did not have authority to act in place of the agency in the context of statutorily required steps towards a decision from which the Petitioner would need to contest with an appeal to OAH." In his order, ALJ Ward granted Parker's motion for directed verdict, ruling that because DHHS had offered no evidence, Parker was entitled to judgment as a matter of law. ALJ Ward ordered that "[DHHS's] decision to withhold funds alleged to be due in the "Tentative Notice of Overpayment" dated May 4, 2012, prepared by [DHHS's] contractor Public Consulting Group, ... must be REVERSED" and that "[DHHS] is permanently enjoined from withholding any of the referenced funds[.]" On 9 October 2014, the OAH issued an amended final decision adding information about exhibits introduced at the hearing. DHHS filed a petition for judicial review of the OAH's final decision on 5 November 2014.

On 9 March 2015, the trial court conducted a combined hearing on DHHS's petitions for judicial review of the OAH's final decision in this case and in the companion case, discussed below. DHHS again relied solely on its defense of lack of subject matter jurisdiction, and did not offer evidence on any substantive issue. On 23 March 2015, the trial court entered an order affirming the OAH's final decision. DHHS entered timely notice of appeal to this Court.

B. Appellate Case No. COA 15–1033

On 15 December 2011, Parker was sent a TNO from PCG, informing Parker that PCG had conducted a post-payment review of a small percentage of Parker's past Medicaid claims and had tentatively identified improperly paid claims in the amount of $7,908.24. PCG extrapolated this result and reached a tentative determination that Parker owed a total of $594,741.00 to DHHS. Parker did not respond to the TNO. In October 2012, DHHS began withholding payment of all Medicaid claims to Parker in order to satisfy Parker's $594,741.00 "debt" to DHHS. On 17 October 2012, DHHS denied Parker's request for a reconsideration review of the alleged overpayment. On 3 December 2012, Parker filed a petition for a contested case hearing before the OAH. DHHS moved to dismiss Parker's petition for a contested case hearing, on the grounds that the OAH lacked subject matter jurisdiction over the matter because Parker had failed to appeal from the TNO within the time limits for appealing an adverse determination by DHHS.

On 14 December 2012, ALJ Beecher R. Gray entered an order denying DHHS's motion to dismiss Parker's petition and enjoining DHHS from further withholding of Parker's Medicaid claims payments. On 24 January 2013, DHHS filed a petition in superior court for "writs of certiorari, prohibition, and mandamus" to stay the effect of ALJ Gray's order. On 27 February 2013, Judge Reuben F. Young entered an order denying DHHS's petition. A contested case hearing on this case and the companion case discussed above was conducted before ALJ Ward on 30 July 2014. DHHS did not offer evidence on the substantive issues, but relied only on its defense of lack of subject matter jurisdiction. On 6 October 2014, ALJ Ward issued a final decision denying DHHS's motion to dismiss Parker's petition for lack of subject matter jurisdiction, entering a directed verdict for Parker, and ordering that " [DHHS's] decision to withhold funds alleged to be due in the "Tentative Notice of Overpayment" dated December 15, 2011, prepared by [DHHS's] contractor Public Consulting Group ... must be REVERSED" and that "Respondent is permanently enjoined from withholding any of the referenced funds[.]"

DHHS sought judicial review of the OAH's final decision, and a hearing was conducted before the trial court in this case and the companion case on 9 March 2015. On 23 March 2015, the trial court entered an order affirming the OAH's final decision. DHHS has appealed to this Court.

II. Consolidation of Cases

In each of the two cases before us, DHHS is the appellant and Parker is the appellee. In each case, (1) Parker took no immediate action in response to a TNO it received from PCG; (2) when Parker learned, many months later, that DHHS was withholding payment...